Luxury Homes Lead Housing Market Downturn in Sydney and Melbourne

High-end homes in Sydney and Melbourne are leading the housing market downturn, with values dropping by over 10 per cent from peak levels. According to recent property data, homes valued in the top 25 per cent have declined by 10.7 per cent in Sydney and 10.5 per cent in Melbourne.

The median value of these expensive homes is $2.1 million in Sydney and $1.2 million in Melbourne. In contrast, lower-priced homes and units have shown greater resilience. Gerard Burg, head of research at Cotality, noted that the decline has spread beyond Sydney, Melbourne, and Canberra, affecting a broader range of markets.

"More recently, however, home values have also started declining across Brisbane, Adelaide and Perth, demonstrating that the downturn is now affecting a broader range of markets," he said.

In Brisbane, Adelaide, and Perth, price declines have been more evenly distributed across all price points, reflecting their later entry into the downturn. Peter Maloney, group CEO of Herron Todd White, said buyers at the top end of the market generally have greater capacity to delay a purchase, while sellers can take longer to adjust their expectations.

"But it's important not to treat prestige property as one national market," he said.

National annual sales have fallen by 2.7 per cent over the year to August, with capital cities down 5.2 per cent, according to Cotality data. Regional sales rose 1.8 per cent, but Professor Emma Baker, director of the Australian Centre for Housing Research, noted that localities classed as regional vary widely.

"Some of it, I suspect, is investors stepping back and waiting to see what happens," she said.

Open home attendance rates suggest the premium end is beginning to turn. Ray White Group chief economist Nerida Conisbee said the number of people attending open homes halved between January and July this year, but attendance has edged back up since then.

"Since then, the decline has stopped and attendance has edged back up," she said.

Maloney said affordability was stretched, borrowing costs remained elevated, and buyers had more stock to choose from, shifting negotiating power towards the buyer and putting downward pressure on values.

Unit market value is also downtrending, but units have generally proven more resilient throughout the downturn, supported by their relative affordability and lower entry price points.